Global menu

Our global pages

Close

EU: Milestone reached in public procurement with adoption of new Directives

  • Ireland
  • General

30-04-2014

A significant milestone in the modernization of EU procurement rules was reached on 11 February 2014 when the Council of the European Union announced that it had adopted a package of three new public procurement directives (‘Directives’). Two of these directives replace the older Utilities Directive and Public Sector Directive and the third introduces a new directive on the award of concession contracts (‘Concession Contracts Directive’).

The first two of the proposed directives, which will replace the Public Sector Directive and the Utilities Directive, aim at simplifying the rules around procurement procedures thus attracting a greater number of small and medium-sized companies (‘SMEs’ ) as well as promoting value for money and transparency in how public authorities provide goods and services. The third proposed directive, on concession contracts, is intended to complete the legislative framework for public procurement and address the fact that service concessions are not currently covered by the existing public procurement rules.

Overview of key changes

Some of the key changes introduced by the new Directives are as follows:

  • MEAT AS SOLE AWARD CRITERION – under the current Public Sector Directive, contracting authorities have a choice to award contracts on the basis of lowest price or most economically advantageous tender (MEAT). This choice has now been removed and under all three of the new Directives, contracting authorities must award contracts on the basis of MEAT. This shall be identified on the basis of the price or cost, using a cost effectiveness approach, such as life-cycle costing, and may include the best price-quality ratio. The introduction of MEAT as a sole award criterion will encourage evaluation of the bids offering the best price-quality ratio. It would also allow an authority to award to the bidder submitting the lowest priced bid provided that that bidder meets minimum quality standards established by the authority. The new Public Sector Directive contains new provisions on ‘life cycle costing’.
  • ESTABLISHMENT OF SME-FRIENDLY MEASURES – the new Directives establish measures to facilitate SME involvement such as the requirement for contracting authorities to ‘comply or explain’ in their advertisement in the EU's Official Journal why they did not split up the works or services into lots in cases where the procurement could have been so divided but was not. Other measures introduced to facilitate SME participation include limiting the turnover requirements to two times the estimated contract value, except in justified cases and shortening the timeframes to cut procurement costs and introduce less onerous PQQ requirements.
  • INTRODUCTION OF ‘INNOVATION PARTNERSHIPS’ – the reforms introduce the concept of ‘Innovation Partnerships’ to both the public and utilities sector directives. Innovation Partnerships will allow public authorities to call for tenders to solve a specific problem without pre-empting the solution, thus leaving room to the tenderer to come up with innovative solutions in alliance with the authority. This procedure will be available when a need arises for the development of an innovative service, product or works and the resulting output cannot be met by pre-existing procedures.
  • NEW REGIME FOR CONCESSION AWARDS – at present service concessions are excluded from the public procurement regime and the new Concession Contracts Directive addresses this issue and aims to eliminate the inconsistencies in the approach to awarding such contracts at national level. Concessions are contracts under which a private entity (‘concessionaire’) is given the right to exploit works or services for profit, typically by charging end-users, eg a toll road. The new concessions regime will mean that all concessions above €5,186,000, subject to certain exemptions in respect of water, must be advertised in the EU's Official Journal. Individual contracting authorities can decide how their tender procedure will run subject to basic principles, including taking appropriate measures to combat fraud and corruption and compliance with general principles of transparency and equal treatment.
  • PROMOTION OF E-PROCUREMENT – contracting authorities will be required to offer unrestricted and full direct access, free of charge, by electronic means to the procurement documents from the date of publication of the notice. The new procurement directive provides for a switch to fully electronic communication, in particular e-submission, in all procurement procedures within a transition period of two years.
  • BIDDERS CAN BE EXCLUDED FOR PAST POOR PERFORMANCE – the new procurement regimes expand and clarify the grounds upon which bidders can be excluded. These grounds include where a bidder has performed poorly on a previous public contract, where that contract has been subject to early termination or the bidder has had to pay compensation or comply with similar sanctions. This power to exclude bidders can apply throughout the procurement process and may also extend to consortia members and subcontractors. Such exclusion will only be permitted in the case of significant or persistent deficiencies in performance of a substantive requirement. However, the new rules also allow tenderers to provide evidence that they have adopted measures to mitigate the grounds for exclusion and demonstrate their reliability to carry out the tender brief.
  • INTER-AUTHORITY COOPERATION EXEMPTIONS – the Directives transpose relevant European case law to clarify when contractual relations between public authorities fall outside the scope of the Directives.
  • MODIFYING EXISTING CONTRACTS POST-AWARD – the new Directives seek to codify the existing EU case law and rules for the modification of contracts during their term, effectively bringing greater clarity to the procurement process. The new regime provides that a new procurement process will be required where there is a ‘substantial’ modification. Whether a change is ‘substantial’ or not depends on meeting requirements prescribed in the Directives.

Next steps

The new Directives came into force on 17 April 2014 and Member States have now two years to transpose the directives into national law. However, the Irish government has indicated that it is prioritising this area of work with a view to transposition early next year.

Concluding comments

In summary, the new Directives support simplified procurement, better access to SME’s and legal certainty whilst delivering value for money and cutting out the red tape. The adoption of the Directives into national law will provide a platform for public authorities to optimise their use of public procurement thus providing the stimulus package necessary for investment in public services going forward. Whilst the Directives contain numerous measures that will undoubtedly contribute to a modernisation of the law in this area, only time will tell whether the new regime will have the desired effect of expanding and streamlining competition on an EU platform.

Disclaimer

This information is for guidance purposes only and should not be regarded as a substitute for taking legal advice. Please refer to the full terms and conditions on our website.

< Go back

Print Friendly and PDF
Register to receive regular updates via email.